Question

Match each example to one of the following behavioral characteristics.

a. Investors are slow to update their beliefswhen given new evidence.	i. Disposition effect
b. Investors are reluctant to bear losses due to their unconventional decisions.	ii. Representativeness bias
c. Investors exhibit less risk tolerance in their retirement accounts versus their other stock accounts.	iii. Regret avoidance
d. Investors are reluctant to sell stocks with“paper” losses.	iv. Conservatism bias
e. Investors disregard sample size when forming views about the future from the past.	v. Mental accounting

Short answer

a. – iv

b. – iii

c. – v

d. – i

e. - ii

Step-by-step solution

Definition

The course that provides psychological theories to evaluate the market outcomes and anomalies is known as behavioral finance.

Explanation on the behavioral characteristics

a. Investors are slow to update their beliefs when given new evidence.	i. Conservatism bias
b. Investors are reluctant to bear losses due to their unconventional decisions.	ii. Regret avoidance
c. Investors exhibit less risk tolerance in their retirement accounts versus their other stock accounts.	iii. Mental accounting
d. Investors are reluctant to sell stocks with “paper” losses.	iv. Disposition effect
e. Investors disregard sample size when forming views about the future from the past.	v. Representativeness bias